Remodeling Fever Cools?

WASHINGTON – While a large number of U.S. fabricators and installers with shops full of jobs might disagree, a key housing survey showed the residential remodeling rush tapering off at the end of last year.
Results from the National Association of Home Builders‘ Remodeling Market Index (RMI), released in late January, showed that residential property owners put off significant additions and improvements in response to weaker economic conditions and seasonal factors.
“Remodelers reported a fairly weak amount of activity near the end of what was overall a very strong year for home improvements,” says Bill Owens, CGR, a remodeler from Columbus, Ohio and chairman of the NAHB Remodelors’ Council™. “Some of the decline was undoubtedly due to owners’ decisions to delay property improvements in light of economic jitters. What’s encouraging is that the vast majority of remodelers surveyed for the RMI are expecting solid dollar volumes and profit margins in 2003.”
The RMI is based on a quarterly survey of more than 600 professional remodelers (who may or may not include stone in their product mix), with answers gauged for measurement on two separate indexes. The first index tracks work recently completed or in progress, and the second focuses on bids and future work schedules to determine market demand.
Both indexes fell substantially in the fourth quarter (4Q) of 2002 in comparison to 3W 2002, but year-by-year comparisons reveal marginal declines. The index gauging current market conditions rested at 43.2 at the end of 2002, down 6.6 points from its standing in the previous quarter, but less than two points below the 45 at the end of 2001. The index gauging future plans stopped at 39.1 at the end of 2002, down about nine points from the third quarter’s 48.2 reading – but less than four points off its 42.8 standing at the end of 2001.
“Remodelers reported the exact same level of maintenance and repair work on homes and apartments in the final quarter of 2002 as they did at year-end 2001,” Owens notes. “This indicates that there’s a baseline of activity when it comes to essential work that owners commission to keep their homes and apartments functioning properly, even as they postpone the more discretionary improvements and additions.”
Though remodelers in all four regions of the country saw less business in the final quarter of 2002 than they did in the previous quarter, remodelers in the South and West were slightly busier at the end of 2002 than at the end of 2001.
Meanwhile, results of special questions in the RMI revealed that remodelers are not only pleased with their total business activity for 2002, but that they are expecting even better results in 2003.
For example, asked about the number of remodeling jobs completed by their company in 2002, 83 percent said that volume had either increased or stayed the same, while only 27 percent said it had decreased. And, 89 percent expected the dollar volume of remodeling jobs to either increase or stay the same in 2003 compared to 2002, while 91 percent expected profit margins to increase or stay the same this year.
“The bottom line is, remodelers aren’t expecting an instant rebound in remodeling jobs this year, but we are confident that activity will ratchet back up during the spring home improvement season,” Owens says. “Factors such as rising home values, which give people more equity to borrow against for home improvements, plus stellar financing conditions, will continue to drive professional remodeling in 2003.”